In the modern world, it is necessary for a state to maintain close contact relation with the rest of the world. This is more important in the context of the economy. Without a proper network of the economic system with the rest of the global system, it is not possible for a state to survive. However, uncontrolled economic policies often result in the failure of the entire system. Under such parameters, it is important to take alternative perspectives on the role of the state in economic development.
Globalization is the principle of foreign economic policy, connected with the good’s free trade on the world market. The classical international agreements of free trade assume the elimination of tariff and non-tariff barriers in mutual good’s trade, whereas each of the member countries preserves its own control system of trade with the third countries. The debates about what to prefer – free trade or protectionism – lasted for hundred years. The argument in favor of free trade was always that it ensures maximum competition, therefore, maximum production efficiency, reduction in the prices, and finally benefit to the user. (Mander 1996)
The argument in favor of protectionism was always the fact that free trade was fraught with completely negative consequences for the national economies, both in the short term and in the long-term perspective. It increases unemployment and leads to the crash of local producers in the short term perspective. But it forces the weaker countries to be occupied by the unprofitable economic activity in the long-term perspective. Although there are several advantages to supporting free trade, it does not benefit third world nations because it is unfair trade and it makes poverty in that nation worse. (Stiglitz 2006)The main organization which helps to promote free trade by making rules and regulations that those involved in international trade must follow is the World Trade Organization. Examples of free trade agreements are the North American Free Trade Agreement or NAFTA and the Free Trade Area of the Americas or FTAA.
In the context of an alternative perspective on the role of the state in economic development, it can be stated that the responsibility of the state becomes more intense. Neo-liberalism is a tag for economic laissez-faire that explains government policies intended to endorse liberated competition between trade firms inside the market, particularly liberalization and monetarism, which is distinct from Globalization, which generally refers to greater international cultural exchange, dissemination of multiculturalism, and enhanced individual access to cultural diversity. (Smith 2007) In a broad spectrum, neo-liberalism corresponds to a back off from the Keynesian economics that was prevailing without more ado after World War II (James 2006).
The idea endorses a liberalization of capital markets, therefore, termed as “neo-liberal reform”. More particularly, neo-liberalism encourages a stable currency, free-market capitalism, unbiased budget, and free trade. Distinguishing characteristics take account of spreading out of the market to around-the-clock global trading cycle, pact animalization, and augmentation in the rate of recurrence of contracts, incessant evaluations, and imitative markets. Antagonists argue that neoliberalism is the functioning of comprehensive capitalism through military or government interference to guard the interests of multinational conglomerates, over and above this free trade also casts influences on wages and social structures. (Stiglitz 2002). Neo-liberalism look upon market mechanism as superior to states are distinct from globalization, which refers to the growing incorporation of economies and societies around the globe. Thus, it is imperative that the role of the state should be more responsible in the context of the economy under globalization.
However, this approach has a lot of disadvantages, especially for poor countries. First of all, the commercial policy of the developed countries hampers to the developing countries to use their competitive advantages, leading developed countries to obtain the lion’s share of gain from the trade (Bhagwati 2004); although, the free trade leads to the higher employment in the developing countries over the short term perspective, in the long-term perspective its influence on the employment specifically, at the same time leads to a reduction in the social and ecological standards in all countries because of the growing international competition. (Murray 2006)
The people of Colombia are protesting a planned free trade agreement with the United States because they feel it will worsen the unemployment crisis already taking place in Colombia. They are afraid that business owners in Colombia who grow such products as sugar cane, rice, corn, potatoes, and cotton (Smith 2007) won’t be able to compete against United States products, and many businesses will be closed, thus the unemployment will increase.
It should be noted that globalization and free economic trade policies are advantageous for developed countries and less favorable for third world countries. Globalization and Free trade should exist. But there must be used more protective measures for nation producers like different taxes and tariffs. In other words, there should be an alternate role of the state in the economic policies and determination of protective measures. (Kiely and Marfleet 2005) Businesses could produce items that are less costly to produce locally rather than import, and export surpluses of those products or materials. Considering that the tariffs and taxes are good for local businesses but are hurtful for the pockets’ of consumers and absence of low tariffs and taxes are hurtful for production businesses and their employees. (Steger 2002) It could be considered that the passage to free trade must stimulate the trade between the member countries and do not create additional barriers for the third countries. Free trade by goods must be mutual and cover a major portion of the commodity turnover between the sides, including the basic sectors of the economic activity. (Waters 2004)
It can be stated that Globalization has two main components, the globalization of production and the globalization of markets. Intellectual and bystanders of globalization pressure convergence of prototypes of manufacture and expenditure and a consequential homogenization of customs, others strain that globalization has the prospective to take countless miscellaneous appearances. (O’Riordan 2001). Furthermore, Changes in the social structure environment of the organizations influence Human Resources Management (HRM) trends. Industrial relations and human resource management techniques in countries, sub-regions, and regions, have been influenced by a range of circumstances and actors such as political philosophies, economic urgencies, the role of the State in determining the direction of economic and social development, the influence of unions and the business community, as well as the legacies of colonial governments. (Steger 2003) Thus, it is obvious that there is a substantial change happening these days in the context of the global and local economies. To control these factors the government of the third world or underdeveloped countries should take additional measures in economic affairs with needed control over the trade systems. This should be the most important alternate economic role of the State under globalization.
This is because economic opinions by laissez-faire logicians assert that unobstructed free trade benefits the rich and those with more pecuniary influence at the disbursement of the poor and deprived people (Steger 2003). Some argue that globalization inflicts credit-based economics, consequential in indefensible enlargement of liabilities and debt crises. Many international organizations that have a strong worldwide authority are not democratically maintained, nor are their heads democratically selected. Consequently, they are assumed by people as supernational undemocratic authorities. To keep a check on these authorities the most functional and positive institution available is the state itself (Mander 1996). That is why it is so important for the state to practice a significant role in economic stability and development.
In conclusion, it should be stated that the role of the state in the regulation of economic policies is a complete requirement. However, it is not preferred that the state would directly indulge itself in every transaction. Thus, the alternative perspective on the role of the state in economic development is necessary for overall monitoring the trends and development. This is the best possible method to develop and sustain a growing economy in the context of developing nations. For this purpose, it becomes much more important for states to monitor the economic developments and changes. Therefore, the alternative perspective on the role of the state in economic development is a much-needed approach.
Bhagwati, J 2004, In Defense of Globalization, Oxford, New York: Oxford University Press.
James, J 2006, Globalization, Information Technology and Development, New York: St. Martin’s Press.
Kiely, R and Marfleet, P 2005, Globalisation and the Third World, New York: Routledge.
Mander, J 1996, The case against the global economy: and for a turn toward the local. San Francisco: Sierra Club Books. ISBN 0-87156-865-9.
Murray, W E 2006, Geographies of Globalization, New York: Routledge/Taylor and Francis. ISBN 0415317991.
O’Riordan, T 2001, Globalism, Localism and Identity, London: Earthscan.
Smith, C 2007, International Trade and Globalisation, 3rd edition. Stocksfield: Anforme. ISBN 1905504101.
Steger, M 2002, Globalism: the new market ideology, Lanham, MD: Rowman & Littlefield Publishers. ISBN 0742500721.
Steger, M 2003, Globalization: A Very Short Introduction, Oxford, New York: Oxford University Press. ISBN 0-19-280359-X.
Stiglitz, JE 2002, Globalization and Its Discontents, New York: W.W. Norton. ISBN 0-393-32439-7.
Stiglitz, JE 2006, Making Globalization Work, New York: W.W. Norton. ISBN 0-393-06122-1.
Waters, M 2004, Globalization, New York: Routledge.